Exas Roadhouse opened a new restaurant in October. During its first three months of operation, the restaurant sold gift cards in various amounts totaling $3,500. The cards are redeemable for meals within one year of the purchase date. Gift cards totaling $728 were presented for redemption during the first three months of operation prior to year-end on December 31. The sales tax rate on restaurant sales is 4%, assessed at the time meals (not gift cards) are purchased. Texas Roadhouse will remit sales taxes in January.

Required:

1. & 2. Record (in summary form) the $3,500 in gift cards sold (keeping in mind that, in actuality, the firm would record each sale of a gift card individually) and the $728 in gift cards redeemed. (Hint: The $728 includes a 4% sales tax of $28.).

Question

Business

Greta Koch

22 January, 20:38

Exas Roadhouse opened a new restaurant in October. During its first three months of operation, the restaurant sold gift cards in various amounts totaling $3,500. The cards are redeemable for meals within one year of the purchase date. Gift cards totaling $728 were presented for redemption during the first three months of operation prior to year-end on December 31. The sales tax rate on restaurant sales is 4%, assessed at the time meals (not gift cards) are purchased. Texas Roadhouse will remit sales taxes in January.

Required:

1. & 2. Record (in summary form) the $3,500 in gift cards sold (keeping in mind that, in actuality, the firm would record each sale of a gift card individually) and the $728 in gift cards redeemed. (Hint: The $728 includes a 4% sales tax of $28.).

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Answers (1)

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Glenn · Answer 1

The journal entries are as follows:

1. Cash A/c Dr. $3,500

To Unearned revenue $3,500

(To record gift cards sold)

2. Unearned revenue A/c Dr. $728

To Sales tax payable A/c $28

To sales revenue $700

(To record gift cards redeemed)

Note : The $728 includes a 4% sales tax of $28.